The property market might be booming, but don’t expect it to go bust any time soon.
That’s the view of Antony Cahill, who has watched house prices rise as National Australia Bank’s executive general manager in charge of lending and deposits.
“The market is certainly continuing to perform strongly and of all the cities, Sydney is the standout at the moment,” he told The Australian Financial Review.
“When you look at where we are in terms of values across the market place, affordability remains at good levels at this point in time. While prices have steadily increased, they are not at the levels we saw in 2007 and 2008. “We still believe there is room for house prices to grow. The other side of it is that interest rates, at this point in time, are incredibly competitive, so the cost of borrowing in terms of affordability is at the best level in the last five years or so,” he said.
With record low interest rates fuelling the market, house prices across Australia rose by an average of 9.8 per cent in 2013, leading some commentators to issue warnings about a potential bubble.
The market was strongest in Sydney, where property values rose 14.5 per cent, while house prices increased by 10 per cent in Perth and 8.5 per cent in Melbourne.
Mr Cahill said he expected property values to continue going up in 2014, though the pace of growth may slow in places such as Sydney.
“There has been some language used by some commentators and the word bubble has been used. But from our perspective, we certainly still believe the market is in balance.
“We don’t think we are seeing extremes when we look at the overall portfolio,” he said.
“There might be some areas that have grown a little bit too quickly, but overall when we look at our portfolio and what we are seeing at a national level, we are comfortable.
“In Sydney, we will continue to see growth, but personally I am not sure we will continue to see that level of growth in Sydney over the next 12 months.”
As property prices climbed, the number of home loan approvals rose to the highest in four years in November, according to the latest Australian Bureau of Statistics data.
This prompted banks and other lenders to compete aggressively for the growing number of mortgage customers. NAB has had the lowest or equal lowest standard variable interest rate of the big four banks for more than four years, a factor helped it win market share.
In August and September last year, NAB offered home owners $1000 to switch their mortgage from other lenders and Mr Cahill said this had brought more customers in the door. “The market is extremely competitive. I think all lenders are sort of watching what is happening and I wouldn’t be surprise to see offers come from other lenders and we will see what our response will be,” Mr Cahill said.
“One of the things that we have consistently said is that we are absolutely committed to remaining competitive. We know that customers look at that interest rate as an important part of their consideration.
“Whilst we haven’t set it in stone that we are absolutely going to remain there [the lowest standard variable rate, I think you can remain confident that we will be competitive.”